Thai Beverage Public Company Limited’s Latest Earnings: Strong Revenue Growth Seen, But Can It Last?

Thai Beverage Public Company Limited  (SGX: Y92) reported its fiscal first-quarter earnings last Friday. The reporting period was for 1 January 2016 to 31 March 2016.

The food and beverage (F&B) purveyor may be best known as the brewer of the Chang brand of beer. Operationally, Thai Beverage’s business can be divided into four major segments, namely Spirits, Beer, Non-alcoholic Beverages and Food. Geographically, the company operates mainly out of Thailand.

You can catch up with the results from the company’s last quarter in here.

Financial highlights

The following’s a quick rundown on the latest financial figures for Thai Beverage:

  1. Revenue for the first-quarter was THB 55.2 billion, up 21% compared to the same quarter a year ago.
  2. Profit attributable to shareholders was up 30% for the reporting quarter. Thai Beverage recorded a profit of THB 8.6 billion compared to THB 6.6 billion a year ago.
  3. For first-quarter of 2016, Thai Beverage’s earnings per share (EPS) saw a 31% increase from THB 0.26 in the first-quarter of 2015 to THB 0.34.
  4. Cash flow from operations came in at THB 9.2 billion with capital expenditures clocking in at THB 1 billion. This puts the F&B outfit in positive free cash flow territory to the tune of THB 8.2 billion, a big jump from the THB 4.0 billion in free cash flow seen in the first-quarter of 2015 (THB 5.3 billion in cash flow from operations and THB 1.3 billion in capex).
  5. As of 31 March 2016, Thai Beverage had THB 4.7 billion in cash and equivalents and borrowings of THB 36.2 billion. This is an improvement from the previous sequential quarter when the company had THB 3.5 billion in cash and equivalents and borrowings of THB 44.3 billion.

Thai Beverage had brewed up a strong quarter with higher sales and profits. The F&B operator also generated good free cash flow as well. This may be important, as the firm carries a fair amount of debt on its balance sheet.

Operational highlights

Thai Beverage’s Spirit segment sales was up 5.3% for the quarter, ending with THB 31.1 billion. The segment is responsible for the lion’s share of the company’s net profit, contributing THB 5.7 billion to the total profit pie for the quarter.

Meanwhile, revenue from the Beer segment soared over 71% year-on-year to THB 18 billion. The segment had benefited from an increase in sales volume and sales prices. Net profit came in at THB 1.6 billion for the period, a 175% spike from the THB 595 million seen in the same period a year ago.

Non-alcoholic beverage sales was also up 13.3% year-on-year, ending with THB 4.5 billion for the latest quarter. The segment, though, recorded a loss of THB 0.22 billion. Elsewhere, the Food segment recorded THB 1.5 billion in revenue for the reporting quarter.

Thai Beverage had shared the following commentary in its earnings release on its outlook for 2016:

“Thai economy in 1Q 2016 continued to decelerate. Private consumption expanded at a slower pace after the short term economic stimulus package in the previous quarter. As consumers were anxious about slow recovery of Thai economy, which was affected from the uncertainty of global economy, particularly the slowdown in China economy.

Consumer Confidence Index in the first quarter stood at 62.4 points, decreasing from 65.1 points in the previous quarter. In addition, lower farm income was affected from the lower in both outputs and prices. The drought caused the decrease in agricultural products, while the prices of rubber and cassava fell because of the decrease in demand from China. However, robust growth in public spending and tourism sector played an important role in supporting the economy.

In the middle of the first quarter this year, Excise Department increased tobacco tax, resulted in the anticipation for increasing alcoholic beverage excise tax in the near future. The stock up of inventory by agents caused the positive impact on alcoholic beverage industry’s performance amidst the stagnant economy.”

From the statement, it appears that Thai Beverage’s spike in revenue this quarter could be due to agents buying inventory ahead in anticipation of an increase in excise taxes.

As a reminder, Thai Beverage is planning to change its fiscal year end from 31 December to 30 September. This would mean that the next fiscal year 2016 will have nine months, to facilitate the change.

At its closing share price of S$0.75 last Friday, Thai Beverage had a trailing price to earnings ratio of 17.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.